The optimal capital budget is the size of the capital budget where the rate of return on the marginal project is equal to the marginal cost of capital.

Question

Quizplus · Accepted Answer

This statement is true. The optimal capital budget is the one where the rate of return on the marginal project is equal to the marginal cost of capital. This is because any investment beyond this point would cost more than it would return, reducing the overall profitability of the capital budget.

The Optimal Capital Budget Is the Size of the Capital